Jim's Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Jim's Pharmacy make to show the March remittance?

Question

Quizplus · Accepted Answer

Sales taxes collected by Jim's Pharmacy are not an expense, but a liability owed to the state government. Therefore, the entry would be to credit Sales Taxes Payable for $600 and debit Cash for $600 to show the remittance of the sales taxes collected. Option A is incorrect because it records sales taxes as an expense instead of a liability owed. Option C records both an expense and a liability, which is unnecessary. Option D is incorrect as the remittance of sales taxes collected requires an entry to be made.

Jim's Pharmacy Has Collected $600 in Sales Taxes During March